Allowance for Doubtful Accounts

12 Months Ended

Sep. 30, 2020

Deposits with and receivables from broker-dealers, clearing organizations, and counterparties, net, receivables from clients, net, and notes receivable, net include an allowance for doubtful accounts, which reflects the Company’s best estimate of probable losses inherent in the accounts. The Company provides for an allowance for doubtful accounts based on a specific-identification basis. The Company continually reviews its allowance for doubtful accounts.

The allowance for doubtful accounts related to deposits with and receivables from broker-dealers, clearing organizations, and counterparties was $1.3 million and $36.9 million as of September 30, 2020 and September 30, 2019, respectively. During the year ended September 30, 2020, the Company charged off $35.6 million of receivables against the allowance for doubtful accounts related to the physical coal business, which the Company exited in fiscal 2018.

The allowance for doubtful accounts related to receivables from clients was $25.8 million and $11.7 million as of September 30, 2020 and September 30, 2019, respectively. The Company had no allowance for doubtful accounts related to notes receivable as of September 30, 2020 and September 30, 2019.

During the year ended September 30, 2020, the Company recorded bad debt expense of $13.0 million. The bad debt expense during fiscal 2020 primarily related to $3.5 million of client OTC derivative account deficits in the Commercial segment, $5.4 million of client exchange-traded futures and options on futures account deficits in the Institutional segment, and $0.6 million of OTC derivative client account deficits in the Retail segment. The Company also incurred bad debt expense of $3.2 million within the Commercial segment related to receivables in the Company’s physical energy commodity business.

During the year ended September 30, 2019, the Company recorded bad debt expense, net of recoveries, of $2.5 million, including a net increase in provision for bad debts of $2.6 million, direct write-offs of $0.3 million, and direct recoveries of $0.4 million. The increase in provision for bad debts during fiscal 2019 primarily related to $2.7 million of client OTC derivative account deficits in the Commercial segment, and $1.4 million in the Institutional segment, partially offset by client recoveries in the Commercial segment. Additionally, during the year ended September 30, 2019, the Company recorded recoveries on the bad debt on physical coal of $12.4 million, reducing the allowance for doubtful accounts related to deposits with and receivables from broker-dealers, clearing organizations, and counterparties. See additional information in Note 19.

During the year ended September 30, 2018, the Company recorded bad debt expense, net of recoveries, of $3.1 million, including a net increase in provision for bad debts of $2.9 million, direct write-offs of $0.3 million, and recoveries of

$0.1 million. The increase in provision for bad debts during fiscal 2018 primarily related to $2.8 million of agricultural OTC derivative client accounts deficits in the Commercial segment and $0.4 million of client exchange-traded futures and options on futures account deficits in the Institutional segment, partially offset by a provision decrease in the physical agricultural and energy business of the Commercial segment. Additionally, during the year ended September 30, 2018, the Company recorded charges to earnings of $1.0 million, to record an additional allowance for doubtful accounts related to a bad debt incurred in the physical coal business. See additional information in Note 19.

Activity in the allowance for doubtful accounts for the fiscal years ended September 30, 2020, 2019, and 2018 was as follows:


(in millions)	2020		2019		2018
Balance, beginning of year	$	48.6	$	58.2	$	54.6
Provision (recovery) for bad debts	13.0		(9.8)		3.9
Allowance charge-offs	(35.6)		(1.3)		(0.3)

Other(1)	1.1		1.5		—
Balance, end of year	$	27.1	$	48.6	$	58.2
(1) Allowance increase is related to a recoverable amount due from an affiliated party and recorded in ‘other assets’ on the consolidated balance sheets.